XBRL from the European Parliaments perspective IFRS Annual Convention / 25. April 2012 Key-note speech by Dr.

Wolf Klinz, MEP

General remarks

Certain European regulators, tax authorities and business registers have already developed different reporting rules and requirements, as well as different tools and mechanisms for accessing information. Member States have adopted national solutions for filing, storage and dissemination of information on public interest (listed) companies and SMEs (in great majority non-listed). In conclusion: we are facing de-fragmentation in the EU.

Even though we, as the European Parliament, in 2010 granted the ESMA the power to develop common technical standards, this still does not guarantee that standardisation will branch out to cover all financial industries and encompass all company information processed by business registers, tax administrations, statistical offices and so on. Cross-border access to financial markets information still remains significantly limited.

In order to manage their risks, financial institutions that provide finance to SMEs,, complement the data obtained from public registers, with home-produced and costly private information databases. Cross-border credit is limited and, for many SMEs, a limited supply of local credit makes credit expensive. In terms of the European economy, European SMEs are at a disadvantage.

The fact that the same information is reported through multiple channels to different regulators and governments creates an unnecessary administrative burden in terms of economic activity, inconsistency of data and confusion of markets.

In order to provide greater efficiency we believe we have the answer: the answer to this is: XBRL.

Provided that all public administrators in all Member States introduce proper IT systems to read data, the initial implementation cost across the EU will be paid off very quickly and will provide the following benefits: the cutting of red-tape both in companies and in public administration (through operating one file / one system instead of the current 3-5 on average) and making EU companies more transparent and therefore more attractive - to international investors.

Current situation in the EU

A number of EU Member States already have some experience in terms of the implementation of XBRL. However this is on many different levels and is not internationally harmonised.

National projects mainly use XBRL for filing balance sheets and enhancing banking supervision with relevant data. Some Member States look to this project for the deliverance of statistical data.. Countries that have thus far carried out the most in terms of mandatory XBRL (those are: Belgium, Italy, the Netherlands, Estonia, Denmark, Spain, and the UK) have requested almost a full package of the information collected and shared in this electronic format.

Up until now, XBRL has been missing strong European political leadership. In the past, the EU has usually always been at the forefront of implementation of international accounting standards when compared with other jurisdictions. For example, the EU was the first jurisdiction to complete the implementation of IFRS. However, regarding the implementation of XBRL, the EU is behind countries such as Japan, the USA and China (interestingly, those countries consider XBRL as a facilitator to ease transition, if and when they will decide to adopt IFRS).Regrettably, XBRL was not even amongst the desired policy objectives in the European Commissions impact assessment on the review of the Accounting Directive. Furthermore, the European Commission has not even considered the possible inclusion of the XBRL format in its current review of the Transparency Directive!

Discussion in the EP and ECONs Position 2

Following the adoption of the Commissions proposal in October 2011, the first step for the European Parliament in the legislative process has been to draft Reports and Opinions on this matter. There has been strong cooperation between JURI as the leading committee and ECON as the Committee providing its opinion, due to the fact that ECON is taking the lead on IFRS-related regulation.

I am the ECON-Rapporteur for the Accounting Directive and therefore changes to include XBRL reporting will be made to this Directive first. Nevertheless, a comprehensive EU-wide approach to the possible implementation of XBRL needs to be found. Therefore I, as the ALDE-Shadow on the Transparency Directive, will put forward amendments mandating XBRL to be provided in the same format and timeframe for listed companies (mandatory using IFRS).

The implementation of XBRL for listed companies in the Transparency Directive seems to be a good starting point. These companies are bigger, with more advanced IT infrastructure and they use IFRS - therefore they need only 1 taxonomy = IFRS taxonomy. Once implemented for listed companies (desired by at the latest 2018), XBRL experiences could be used in order to mandate it for smaller companies using other taxonomies.

There are discussions on the current review of the Accounting Directives: the Commission has proposed not to mandate IFRS for SMEs in the EU, something which is strongly supported by the EP. In the context of XBRL practicalities it must be assured that an EU-wide implemented XBRL format needs to operate within 27 tax and accounting systems and should not for example, for the sake of costs lead to a backdoor introduction of obligatory reporting for IFRS.

In order to limit one-time costs and provide a smooth transition, EU implementation should be finished at the latest by 2018, following a 6 year preparation period. Synergies between the existing systems, national authorities and the new Banking and Markets supervisory authorities should be assessed and used. An appropriate testing phase is key in providing success. In order to deal with national taxonomies, we intend to ask the Commission and the ESMA to issue delegated acts and guidelines on 3

the implementation process. The timeline for SMEs could be extended, but at the very least listed companies should definitely start by 2018. This would be our pragmatic approach.

Regarding costs: Speaking from the European Parliaments perspective, I would like to point out that any cost-related comments should not be exaggerated. Currently within the Commission itself there are a signifant number of XBRL-projects: especially grants at DG INFSO and DIGIT. It is therefore vital, that strong technical support is already secured..Ongoing projects within the European banking and insurance authorities also need to be taken into acount.

Finally, one of the competitive advantages of developed economies, governments and organisations results from their ability to access quality information concerning companies. This should therefore be another goal of mandating XBRL within the EU not only from an investor, but also from a lenders perspective

The way forward

The European Parliament should have finalised its position on XBRL before the summer break. The European Parliament has already signalled that it will call for a horizontal implementation of XBRL in the EU; hopefully the legislative process will therefore not be too complicated. In parallel, we are hoping to secure the support of numerous Member States within the Council.

Both the Euopean Commission and the European Council anticipate that the European Parliament will push strongly for mandatory XBRL. The Commission has therefore confirmed its support for the implementation of XBRL for listed companies in the Transparency Directive as a first step, followed by SMEs with national taxonomies at a later stage.

Mandating companies currently using IFRS to report in XBRL, will take the relationship between the European Parliament, European Commission, national accounting bodies, ESMA and the IASB to a new level. Despite the fact that IFRS implementation over the last 10 years has been somewhat problematic, the IASB 4

needs to learn from these experiences and place them in an XBRL context. The European Parliament aready anticipates and appreciates the know-how of the IASB in this regard and hopes for continued and fruitful cooperation.

Summary

1) Advantages of XBRL in the EU outweigh disadvantages and costs (e.g. one-time implementing costs) therefore the European Commissionsproposal which excludes mandatory XBRL from the Accounting and Transparency Directives should be amended by the EP;

2) The EU approach should aim to harmonize and extend those projects which are ongoing or which are currently being implemented at both national and at the European level;

3) EU-wide implementation is the right step towards enhancing the competiteveness and efficiency of European companies (long-term less reporting costs + higher transparency for investors).